State tax agents inspected general excise tax licenses and monitored cash transactions at 119 businesses in Chinatown and on Fort Street Mall yesterday for the first time since a clampdown on so-called “cash-only” businesses went awry in Kailua last year.
Special Enforcement Section
Twenty-four merchants in Chinatown and on Fort Street Mall were issued warnings yesterday by state Tax Department agents for:
Yesterday’s visit resulted in warnings to 24 vendors — a dramatic change from the fines, police presence and political fallout that came after the last operation by the Tax Department’s fledgling Special Enforcement Section at the Kailua Open Market on Oct. 28.
Some of the merchants even welcomed their visits from tax agents yesterday.
Hai Nguyen, the owner of Mikiko Jewelry on North King Street, happily handed over his GET license to special agents Sherb Valli and Jon Wolff and said all business people have to abide by the tax rules, which require proof of a GET license, records of all cash sales and the offer of a sales receipt to customers.
“A lot of people selling,” Nguyen said, nodding his head at vendors outside his door. “Everybody have to follow same (rules).”
The Tax Department’s Special Enforcement Section was created after then-Gov. Linda Lingle approved a bill in June 2009 aimed at making “cash economy” operators comply with tax laws.
In their first few months in the field, the special agents were busy visiting restaurants, gas stations, contractors, farmers markets and shopping centers on all islands except Kauai.
On Oahu the special agents investigated storefronts, vendors and mom-and-pop businesses in Ewa Beach, in Chinatown, on Fort Street Mall and at the Aloha Stadium Swap Meet. They also probed flower growers in Mililani and farmers markets in urban Honolulu.
Even though they had issued 88 citations totaling about $36,000 in fines, the Special Enforcement Section operated relatively quietly until a chaotic scene broke out at the Kailua Open Market, when shoppers yelled at two tax agents and police were called after special agents began requesting GET licenses, receipts and sales records.
Two vendors were fined, and a shopper was fined $2,000 for allegedly telling vendors not to provide information to the agents.
In the fallout, the 36th annual Mayor’s Craft and Country Fair was abruptly canceled and holiday crafters, nonprofit groups and even the Girl Scouts suddenly scrambled to research Hawaii tax law.
Yesterday’s visit to Chinatown and Fort Street Mall was intended as a way to regroup after the agents’ experience in Kailua, said Ronald Randall, who was in charge of the Tax Department’s compliance division until yesterday.
At a briefing earlier in the week at the Tax Department’s offices on Punchbowl Street, Randall told the five special agents and lone field supervisor who comprise the Special Enforcement Section that they were expected to issue only warnings, not fines.
“We don’t want to intimidate people,” Randall said. “We want to make sure it’s a friendly environment. We want people to comply with the law.”
Randall emphasized that special agents in the Special Enforcement Section are not interested in nonprofit groups, Girl Scouts selling cookies, people who put on one-time garage sales or anyone selling a used car.
And, despite a persistent myth, businesses are not required to have cash registers, Randall said. But they must keep records of cash transactions and offer a receipt to the customer, he said.
At least temporarily, Randall said, special agents will focus on education and warnings to get businesses to comply with state tax laws.
Yesterday the special agents handed out thick packets of tax information, including translations in several different languages.
When the day was over, Tax Department spokeswoman Mallory Fujitani said the ratio of 119 business visits to only 24 warnings showed that most businesses in Chinatown and on Fort Street Mall want to follow the law.
For those who don’t, the special agents from the Tax Department’s Special Enforcement Section will be back.
“We need to make sure we’re out there,” Fujitani said, “making sure people know what they need to do.”